16 December 2017

Postscript

This is my last blog of 2017 which has been a momentous year in which the speed of change in many areas accelerated and most political leaders failed to keep up with it. In writing a blog I try to reach a definitive conclusion on an issue, but such is the speed of change that soon events have also left me behind. Here are a few afterthoughts on issues I addressed during the year, but where new information has come to light.

Brexit
I blogged on Brexit in September. [i]It is undoubtedly the biggest issue facing the British people in this and perhaps many years to come. I voted to leave but did not for a minute think it would be easy. But I thought that by now, nearly 18 months after the referendum, more progress would have been made. It would seem that the EU negotiators have deliberately planted a huge Catch 22 in the path of the British team. They said there were three areas that had to be addressed before trade negotiations were begun.

The status of EU nationals in the UK post Brexit.

The Irish border

The divorce bill

In the past two weeks these three issues have again been discussed with results that both sides claim are positive allowing trade talks to begin but these could have been resolved in this way many months ago.

The UK had already made proposals on 1. The EU did not respond for months, except to say that the whole of the UK’s response did not go far enough.

This is the Catch 22. To discuss the Irish border means discussing trade. But the EU refuses to discuss trade until the issue is resolved. This issue has not really been resolved with the fudge on regulatory alignment and will blow up again. The other literary reference I could make here is Alice in Wonderland.

The divorce bill is easy to settle if the parties have good faith. It is a matter of the balance sheet. A couple of smart accountants could have done this in a few days. Of course, it may not be as easy as I think because the EU accounts have not been audited in decades and so perhaps there is no accurate up-to-date balance sheet. The UK’s offer of £35-45bn over a period of years may be based on some accurate and detailed analysis but no one has explained that to the public. But at least it should keep the EU negotiators at the table because the EU needs the money.

Strong and Stable
In June I blogged on the General Election.[ii]In the 2016 Australian General Election Sir Lynton Crosby advised the Australian Premier to fight the campaign promising ‘Strong and Stable’ leadership. He lost badly. A year later the Prime Minister Theresa May did the same and while not actually losing the election, despite the claims of the Monster Raving Labour Party, she lost her overall majority. Looking at major nations around the world I only see ‘Strong and Stable’ leadership in three countries: China with President Xi; Japan with Prime Minister Abe; and Russia with President Putin. All have a strong grip on power and have high approval ratings from the people. In Germany there is chaos with Angela Merkel unable to form a coalition but refusing the option of fresh elections. In France President Macron won a convincing majority in the Presidential Election but although he won a landslide in the Parliamentary election the turnout was meagre and his share of the electorate only 21%,[iii] far lower than that of Theresa May! So in terms of public opinion he just does not have a mandate to carry out his programme. His approval ratings dropped from 62% two weeks after his election victory to a record low of just 30% four months later.

Meanwhile the normally strong and stable leadership of Angela Merkel had been seriously weakened and destabilised by a poor election result. Her previous coalition with the Social Democrats has collapsed and while the President is asking both leaders to reconsider, if they do join forces again then the Far Right party becomes the official opposition, hardly a recipe for strong and stable government.

Blockchain
I blogged on the possibilities of blockchain in January[iv] and in general was positive about its potential. But I underestimated one key issue: its appalling use of electric power. I was less positive about the best known example of blockchain, that of bitcoin which has soared in value during the year. But I did not realise that in making the multiple calculations and checks on multiple machines it is using more energy than is expended by each of 159 countries, including Denmark and Ireland.

The value of one bitcoin at the time of writing is $16,693 versus less than $1000 a year ago. That this is self-evidently a colossal bubble backed by nothing of inherent value is obvious. It will blow up for sure but no one can predict when with certainty. In the meantime the incentive to mine bitcoins is increasing exponentially. According to Digiconomist, the cryptocurrency analytics company, the total energy used by bitcoin-mining hardware is about 31 terawatt hours (Twh) a year. Ireland uses about 23 Twh and the UK about 309 Twh.

Digiconomist estimates that every bitcoin transaction requires the amount of energy used to power an average UK home for three weeks. The way that bitcoin works means that every transaction has to be verified before it is accepted onto the distributed ledger that makes up the blockchain. This is done by bitcoin miners who perform complex mathematical calculations which take a great deal of computing power. More than half the bitcoin miners are in coal-reliant China. One facility in Beijing runs 25,000 machines in eight buildings with a daily energy bill of $40,000.

At the present rates of growth in just a few months from now the electricity demanded by the cryptocurrency network will start to outstrip what’s available putting stress on the grid and therefore increasing the use of dirty facilities. By July 2019 the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, in just over two years’ time, it will use as much as the entire world does today. This is not just doom-mongering. In some parts of the world there have already been power outages caused by bitcoin. In Venezuela hyperinflation and subsidised electricity have led to a bitcoin mining boom and blackouts have been caused by rogue bitcoin operations.

South Africa
After visiting South Africa in February I blogged on its appalling government[v] and predicted that the government’s debt would be reduced to junk bond status with horrifying consequences. In April Standard & Poor reduced South African debt to double B plus, below investment status and therefore junk. The rand immediately fell sharply on the currency markets.

Social Media
I have blogged twice this year on Social Media, first in March on the scandal of its fraudulent advertising[vi] and then last month on its corruption of modern politics[vii]. But almost every day I read or hear something that shows social media in general going from bad to worse. Their devastating impact on children may be something they never recover from. Their undermining of the state and of the democratic process is also leading the world to disaster. Their economic effect is not well understood but the inability of western governments to generate improvements in productivity which effectively means they can’t pay their bills is certainly partly due to the combination of the addictive nature of social media and the mobile phones on which they are transmitted, about which I blogged in April[viii].

It only remains to wish all my readers a very Merry Christmas and a New Year in which you and yours get more of what you wish for and less of what you don’t need. Thanks to all those who give me feedback which I really value. I’ll be back in 2018.